The term 'vote-on-account' is not designed to stir the passions. Nor, after the excitement he has provided over the past month, did the finance minister go out of his way to create drama.
That was done for him by the opposition benches. In assessing his presentation, I will focus on three aspects: fiscal consolidation; missed opportunities; and the (mis)use of public financial institutions.
On fiscal consolidation, it is sometimes alleged that this finance minister is unconcerned with the fiscal deficit.
Accordingly, it was useful to be reminded by him that fiscal consolidation constitutes one of his "Panch priorities", and to see his pleasure in producing the fiscal outcomes for the year.
The revised estimate for the fiscal deficit 4.8 per cent of the GDP, if realised, compares with 6.1 per cent in 2001-02, and almost equals the 4.7 per cent of 1997-98.
Looking more closely at the numbers, in absolute terms almost all the adjustment is on revenue account: the capital deficit (the difference between the fiscal deficit and the revenue deficit) has, in fact, widened slightly.
On revenue account, interest payments account for about half of the reduction in the revenue deficit. Revenue increases and expenditure management accounts for the remainder.
On the revenue side corporate taxes have been buoyant; divestment revenues and dividends from public enterprises have also both made their contribution. On the expenditure side there has been a slight reduction of subsidies.
Taking a broader view, it is clear that faster growth has been good for fiscal consolidation, and this is what one would expect.
At the same time, there is a worrying lack of buoyancy in most of the tax revenue heads, despite this faster growth, causing the need to rely on dividends and profits from public sector enterprises.
Overall, the public finances have been helped substantially by the direct and indirect effects of a low interest regime.
An even greater effort at generating public savings will be needed to sustain public investment while keeping the growth of debt under control.
Turning to missed opportunities, perhaps the most obvious is the lack of action on linking small saving rates to market rates, as suggested by the Reddy Committee a couple of years ago.
It is widely recognised that such administered interest rates are a major obstruction to the efficient functioning of monetary policy, and establish a de facto floor for the structure of bank rates.
It is inconsistent for the government and the RBI to berate bankers for maintaining lending rates at high levels, without being prepared to take action on this major distortion.
The most disheartening and worrying aspect of the budget speech, though, and of the announcements that preceded it, were the proposals dealing with public financial institutions.
One is reminded of George Santayana's dictum: those who have forgotten history are condemned to repeat it. In the proposals that have emerged, one sees a violation of all the principles of financial sector reform that have guided us since the report of the first Narasimhan Committee over 10 years ago.
On display over the last month has been a veritable chamber of horrors of financial gerrymandering: directed lending, interest rate caps and shotgun marriages of public sector financial institutions with each other.
One can hear the arguments and understand the temptations. The fisc is exhausted, so why not use the banks? There has to be some benefit for keeping them in the public sector: why not exploit it.
If the problem is shoved onto the banks, nobody will check whether they have delivered or not, so it is harmless to establish these targets.
I am convinced that there are considerable risks in going down this path. The rehabilitation of the public sector banks has been a painful process and can only be said to be half complete, even now.
These banks are being asked to compete with both foreign and invigorated domestic private banks. They are being asked to raise capital on the open market.
The experience of much of East Asia (China and Korea included) points to the dangers of so-called policy lending.
Considerable research exists to confirm that interest rate caps are the worst way of trying to direct credit to favoured sectors.
Such lending is typically more costly to undertake than normal corporate lending. The way to encourage lending is to remove, not impose caps. The issue is much less cost than access.
We have also heard the siren call for long-term credit from the industry associations many times before. We know that interest subsidies are probably the worst way to encourage labour-intensive investment.
The government has been too inclined to round up the usual suspects and ask them to do its bidding, than to undertake the harder, but more sustainable effort of creating a policy environment that supports market solutions to achieve the same goals.
To sum up, the direction of change in fiscal matters is encouraging. But the larger intellectual framework of the reform programme seems in need of refurbishing.
One looks forward to the full Budget later in the year to see whether that coherence of vision will reassert itself.
The writer is Director-General, National Council of Applied Economic Research, New Delhi. The views are personal.
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